The Next Step: A Plan for Economic World Federation Part 12

A separate administrative board would be established to handle each of the important administrative problems confronting the world producers'

federation. At the outset there would be such problems as resources, transport, credit and exchange, budget, and the adjudication of disputes affecting more than one division or more than one of the major industrial groups.

It is neither possible nor desirable to draw up a working program for any one of these boards. Such details must be met and solved when the task of administrative work begins. At this point it is only necessary to suggest some of the more important fields in which the boards would operate, and to bring forward typical instances of their functioning.

5. _The Resources and Raw Materials Board_

The survival of a modern industrial centre like the Manchester District of England or the Lille-Roubaix district of France depends upon the supplies of raw material which it is able to secure from and through other industrial groups. These supplies are in turn dependent upon the available deposits of raw materials, the power, and the fertility of the soil. Raw materials and resources are thus the foundation upon which all productive enterprise is based, and it would be one of the first duties of a producers' society to handle this issue successfully.

Some idea of the extent to which a modern industrial community is dependent for its survival upon imported raw materials may be gained from an examination of the trade figures for Great Britain. In 1920 the total value of British imports was 1,936 millions of pounds sterling. Of this amount, 767 millions (more than a third) were for food, drink and tobacco, while another third (711 millions) were for raw materials.

Under these two general headings were included such items as grain and flour 232 millions, meat 142 millions, cotton and cotton waste 257 millions and wool and wool rags 94 millions of pounds sterling. The two main items of food and raw materials, covered more than three quarters of all British imports. (Statesman's Year Book.)

But Britain is a relatively small and very much isolated community, lacking some of the essential resources. It is therefore quite natural that her trade figures should show such a result. The same thing is of course true of j.a.pan, Germany, Holland, Belgium, Italy, France, and in fact most of the important industrial countries. This is taken as a matter of course. Oddly enough, however, it is likewise true of the United States, which is as near to industrial self-sufficiency as any of the leading industrial nations.

Among the 5,278 millions of dollars worth of commodities imported by the United States in 1920, there were 40 million pounds of aluminum, 143 million pounds of rice, 345 million pounds of cocoa and cacao, 1,297 million pounds of coffee, 510 million pounds of hides, 152 million pounds of fresh meat, 603 million pounds of India rubber, 260 million pounds of wool, 510 million pounds of paper stock, 1,460 million pounds of paper, 8,074 million pounds of sugar, 4,459 million gallons of crude oil, 130 million skins, and so on. Here are extensive imports of hides, oil, paper, sugar, coffee, wool and rubber--seven of the most important items of modern commerce. Well supplied as it is with varieties of climate and resources, the United States is nevertheless compelled to import large amounts of some of the most essential raw materials. Like the nations of Europe, it is forced to depend, for these and other industrial essentials, upon portions of the economic world that lie outside the national boundaries.

An examination of these and similar figures tells the story of the industrial future--a story of limited, localized resources upon which the expanding industries will be compelled to make ever increasing demands. Since all of these demands cannot be met there must ensue a ferocious struggle among the nations to secure and hold the resource key to economic advantage. The beginnings of that struggle have already been witnessed in the contest between France and Germany for the coal and iron deposits of Western Europe. Its next stage will include a struggle between Great Britain and the United States for the possession of the world's reserves of oil. Such a struggle, with its appalling toll of suffering and chaos can be obviated in only one way, by an apportionment, among the users, of the chief raw materials, through an agency in whose direction all of those concerned have a share. This result could be accomplished by the resources and raw materials board of the world producers' federation.

The activities of the resources and raw materials board will include:

1. A survey of all available resources and raw materials.

2. A survey of the present consumption of these raw materials.

3. A survey of the present production and of the possible production of these materials.

4. A production budget, a.s.signing to each of the producing areas the amounts of materials that they are responsible for producing.

5. A consumption budget, a.s.signing to the various using areas their quotas of the materials produced.

6. Provision for the increase in production necessary to meet the demands of the consumers of raw materials.

7. Final decisions as to which resources should be used, and for what purposes.

This board would have under its immediate control the destiny of the whole producing world. It would not own the resources any more than the postal department of a government owns the post offices and the mail trucks, but in one case, as in the other, the power to decide on the service to be rendered would rest with the administrative officers.

The need for some central control over the world's resources, and of some clearing house for raw materials seems quite obvious. The world producers' federation faces no more important or pressing issue. In this field alone, through its elimination of sources of conflict and its regularizing of raw material supplies, the world producers' federation could undoubtedly justify its existence.

6. _The Transport and Communication Board_

The transport and communication board would have jurisdiction over all of those activities involving the transfer of goods, of people and of messages, not wholly within one division. Such a plan has been worked out in part in the United States of America, where commerce between the states (interstate commerce) is under the control of the Federal Government, while commerce wholly within one state is under the control of that state. The same principle, applied to a producers' society, would leave local transport in local hands, while all matters concerning world transport would be under the control of the world producers'

federation.

The present economic system depends on the shipment of goods from one point to another. Raw materials are sent from the place of their origin to the fabricating establishment that consumes them. In some cases, these distances are small, but when Cuba sends iron ore to the United States, or when Brazil ships coffee to Europe, or when England sends coal to Italy, the distances are considerable and the means of efficient transport are correspondingly important. The same thing holds true of the marketing of finished products. Many of the goods turned out by the present-day industry--particularly machinery--are very bulky and heavy.

Each of the manufacturing nations sells its goods, not only within its own borders, but at the ends of the earth. The transport of goods thus becomes supremely important.

The transport of goods and of people is only one aspect of the work coming under the direction of the transport and communication board. In addition, there would be:

1. The postal system, which is already on a world basis.

2. The express system, which is really only a branch of the postal system, and which is also on a world basis at the present time.

3. Telephone, telegraph and wireless machinery, which are in their very nature wider than the boundaries of one nation, and which are to-day among the chief means of holding the people of the world close together.

The mechanism of transport const.i.tutes a vast net-work of inter-relations that have been carried farther toward a world basis than any other phase of the world's economic life. The nature of ocean transport, of the postal service, of the express service and of the telephone and telegraph made this inevitable. The inventions and discoveries of the past century have worldized transport without the necessity of any intervention from a producer's society.

While the work of the transport and communication board would be of vital consequence, it would be relatively simple, in that it would involve little innovation, but rather the unification and co-ordination of existing agencies.

7. _The Exchange, Credit and Investment Board_

Many economic writers have characterized the processes of exchange as "non-productive" activities, nevertheless, under the present economic order they lie closer to the seat of power than any other single group of activities. The rise of the banker to his present commanding position is due, primarily, to his control over money, and to his power to issue or to withhold credit. A producers' society may lay far less emphasis on money and its derivatives than does the present system, yet the money function will remain and the money forces will doubtless play some part for a very long period in the new economic order.

Money will owe its position of importance, under a producers' society, to the need for a medium of exchange, and until men discover a means more effective than money for the facilitating of exchange, money will continue to play an economic role.

The inhabitant of a modern industrial community buys many things each day. For the newspaper he spends a penny or two; for the street-car ride, five or ten cents; for fruit, groceries, and other food products, a number of small sums. These transactions, in a country of fifty millions of people, aggregate tens of millions for each day.

There are three possible ways in which such transactions may be carried on: (1) each party may give the other some commodity or service--a bunch of carrots for a street-car ride, a sack of flour for a hat, (2) Money may be employed. (3) A system of book-keeping may be devised, and each purchaser may use a credit card, or some similar device. Barter is impossible. Money is the usual means of facilitating exchange.

Bookkeeping, on a scale requisite for all petty transactions would be an immensely intricate mechanism.

The chances are that at the outset, a producers' society will be compelled to follow the practices of present-day economic life, and to distinguish between the two chief uses of money: money as a means of making change and money as a basis for credit.

This distinction has been pretty well established in all parts of the world. The business man buys his morning paper and his lunch with the change that he carries in his pocket. He buys his automobile or his factory building with a check (credit). Money as a means of making change will continue under a producers' society until some more satisfactory means of handling minor transactions is discovered. Money as a basis for credit will be superseded by a system of social book-keeping.

The money used at the present time is based on an amount of some commodity, such as gold. A producers' society will undoubtedly subst.i.tute for this commodity base some unit of productive effort--an hour's labor or a day's labor in a given industry. Such an idealized labor production period could be used as a basis for all value computations.

There are a number of requirements for such a value measure:--(1) It must be reasonably stable; (2) it must be generally recognized and accepted; (3) it must be the medium in which all values in all parts of the economic world are calculated.

With a standardized labor unit of value once determined, there would be several methods of procedure. One would be to issue a certificate for each unit of labor performed. The pay-check would then serve as money.

Another method would be for the world parliament to issue metal and paper money, using the labor unit instead of gold as the basis of value.

In the former case, there would be a labor check, or piece of money in the community for each unit of labor performed. In the latter case, only so much money would be issued as was required for the ordinary purposes of making change. The latter method is the one now in use. The former would represent a distinct step in advance, in that there would be a certificate of purchasing power in the community for each unit of goods and services that was produced. There would be still a third method of handling the problem, by having the world producers' federation issue paper currency stamped with the statement "this is a mark" or "this is a franc," and making it receivable for all legal and public obligations.

If the amount of this "fiat" money were carefully regulated, it would probably serve all of the purposes for which money is needed. Whatever its character, it is essential that all money and credit should be publicly issued and under public control.

The first problem confronting the exchange and credit board would be to establish some such generally acceptable standard of value. The chaos now existing in exchange rates is but a foretaste of the difficulties that confront a world which is attempting to carry on economic transactions with scores of different moneys and of differing financial systems.

The exchange and credit board would have three other important fields of activity:

1. The computation of the values produced by the various industrial groups.

This result would be accomplished by establishing a clearing house for reports on production in all industries and in all parts of the world.

2. The financing or exchange of materials between the various producing groups.

This activity is now carried on by the commercial banker, who handles trade acceptances, bills of exchange, and the like. It need be no more than a system of book-keeping, with the balances entered as loans from the industries that produce a surplus to those that are using more than they produce. Such a situation would of necessity be temporary, since the aim of the central authority would be to balance values in such a way that there would be an equilibrium all around, with no surpluses and no deficits. Such an ideal condition would never be reached, but it could be approximated.

3. Transfers of capital, or loans negotiated between various industrial groups, and covering more than one division.

These loans would take the form of adverse balances in the general clearing between producing groups, and would cover the advances for improvements and betterments, that one producing group would make to another, or that the world producers' federation would make to one of the producing groups.